Wednesday, June 29, 2016

Court Affirms Order Denying An Administrator’s Attorney’s Fees

Originally published by David Fowler Johnson.

In In re Estate of Williams, attorney Don Ford was appointed an administrator of an estate and hired himself as an attorney for the estate. No. 05-15-00392-CV, 2016 Tex. App. LEXIS 5990 (Tex. App.—Dallas June 6, 2016, no pet. history). Later, the trial court denied some of his requested attorney’s fees, and he appealed.

The court of appeals affirmed. The court first held that the order awarding some, but not all, of the fees requested was a final order and that the appellate court had jurisdiction. The court then reviewed the merits of the dispute. The court held that an attorney, as an administrator of an estate, may also perform the legal work and be compensated for his reasonable attorney’s fees.

Estate Code Section 352.051 provides that on proof satisfactory to the court, a personal representative of an estate is entitled to reasonable attorney’s fees necessarily incurred in connection with the proceedings and management of the estate. The court held that this provision entrusts attorney’s fee awards to the trial court’s sound discretion, subject to the requirements that any fees awarded be reasonable and necessary, which are matters of fact, and to the additional requirement that the fees be incurred in connection with the proceedings and management of the estate.

The court concluded that the trial court did not abuse its discretion in setting the amount of fees as it did.

For example, the record before this Court shows that some of the compensation sought by the Law Firm was for activities that were administrative in nature, rather than legal. Among other administrative activities, the Law Firm’s itemized billing statements include entries for traveling to a bank to set up an Estate bank account, obtaining access to online banking records, coordinating checks and receipts for each creditor, a telephone call to previous counsel to pick up checks, telephone calls with the heirs, preparing annual accounts, and communications with real estate agents concerning the general status of properties. Under these circumstances, the probate court was entitled to conclude the Law Firm had charged the Estate for attorney time when the activity reported had no actual legal significance, and to exclude those charges from the fee award.

The court affirmed the trial court’s award.

Interesting Note: Administrators are entitled to reasonable compensation for their work.  Under Texas Estate Code Section 352.002, the standard compensation is “five percent commission on all amounts that he or she actually receives or pays out in cash in the administration of the estate.” Tex. Est. Code § 352.002. A court may alter this standard compensation formula for unusual estates. Id. at § 352.003. Additionally, an administrator may hire an attorney and pay the attorney “reasonable attorney fees necessarily incurred in connection with the proceedings and management of the estate.” Id. at § 352.051. There is an inherent conflict of interest when an administrator hires himself or herself to do the legal work for the estate. If an administrator is different from the attorney, the administrator would independently review the legal bills to make sure that the work was legal in nature, was reasonable in amount, and was for necessary services. Where the administrator and the attorney are the same person, that check may be lacking. Further, there may be pressure to expand the administrator’s standard compensation formula by billing activities that the administrator does in managing the estate (which should fall under the administrator formula) as legal work (which would be paid by the hour). As the Estate of Williams case shows, this may be easily enough found and rectified in a dependent administration. But it may not be as easily discovered in an independent administration. Of course, a beneficiary always has a claim against an administrator where it breaches its fiduciary duties by overcompensating itself.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.



from Texas Bar Today http://ift.tt/29qnbhs
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